Is retail dying? No, but it is changing in a major way
Ask yourself, what do you do on a weekly basis when you leave the house? Many of us exercise, grocery shop, our wives or lady friends purchase beauty services, we eat out, shop, enjoy entertainment at the movies, comedy clubs, or symphony. The list goes on; all of which require a presence of retail. However, in this ever-changing economy, retailers both large and small must strive to create the experience for the customer. That is where retail is headed…Experiential. If they don’t, they’ll die.
We’ve heard the news; February 2017, Berkshire Hathaway sold off $900 million of Walmart stock. An analysis by Slice Intelligence found that 43% of all online retail sales in the US was through Amazon in 2016. This e-commerce trend continues to grow, and quickly. “Brick-and-mortar retailers have announced more than 3,200 store closures so far this year, and Credit Suisse analysts expect that number to increase to more than 8,600 before the end of the year. For comparison, 6,163 stores shut down in 2008, the worst year for closures on record.” Hayley Peterson – Business Insider. What is the pattern with these closures? The lack of the experience in the store…
Landlords are becoming more and more aware of these trends and some are making the necessary adjustments of change – investing in their properties to create more of an experience for the end user. Those that do are gaining market share. Hence why we’re seeing a large increase on a national level with new retail development, huge renovations to existing buildings, strong retailers shifting locations which in turn are causing rents to increase in the “Class A” Centers. One of the major reasons for the high rents is due to the increased traffic flow to the Center. More visibility and traffic flow increases opportunity for consumer sales, which in turn attracts stronger retailers, which in a nutshell, demands stronger rents. Many tenants want to take occupancy in “Class A” space until they come to understand the costs associated with such. It is not uncommon that Nationally, we’re seeing an average of $40 per square foot in base rent plus triple net expenses which all in is grossing around $50psf (Class A Space).
With a strong brand, detailed business plan, team focused on results, strong sales, and structure; you can position yourself in these “Class A” retail centers and take advantage of the growth in retail expenditure. Ultimately driving strong sales volumes for your concept. Just make sure that the product or service you’re offering is providing an experience for your clientele. With a combination and understanding of big data, positioned with a game winning team, you can make informed and confident decisions in this consistently-changing retail market.
Andrew LaPorte is a member in the retail division at Keyser.